HSBC launches Rate Matcher mortgage - but is it any good?

Published:: 09 June 2009
Topic:: News,Money,Mortgages

HSBC has re-launched its 'Rate Matcher' mortgage offer. This is the second year, the offer has been available and the bank says it will allow borrowers to fix their mortgage at a rate that is the same, or better, than the standard variable rate (SVR) being offered by their existing lender. But is this offer as good as it sounds, or is it more of a marketing gimmick?

Why launch this deal?

When a fixed or discounted mortgage term ends, the borrower moves on to their lender's SVR unless they remortgage on to another product and traditionally SVRs have been significantly higher than the rates available on deals for new customers. However, a number of factors mean that this is currently not necessarily the case: as a result of the shortage of funding caused by the credit crunch, falling house prices and rising numbers of people defaulting on mortgage payments, lenders have widened their profit margins the means rates on new mortgage deals aren't as competitive relative to the Bank of England base rate as they were a few years ago. Coupled with that, recent interest rate falls mean that many SVRs are currently lower than the rates available on new mortgage products and as such many borrowers have been choosing to stick with their existing lender when their mortgage deals end. (If you want to know what your lender's current SVR is, read our article 'How has your lender responded to the rate cuts')

HSBC's new Rate Matcher offer is aimed at encouraging these people to remortgage and lock into a fixed rate, rather than stay on their lender's SVR which will inevitably rise when interest rates start going up again.

So what's the deal?

Rate Matcher offers borrowers the chance to fix their mortgage for two, three or five years. Even if your current deal hasn't ended yet, you can still apply for the HSBC offer as mortgage offers will remain valid for six months.

Two-year rates start from 2.49%, while the lowest rate available on a three-year fix is 3.49% and if you want to fix for five years you will pay at least 4.24%.

The maximum loan size is £250,000 and borrowers must have a deposit of at least 25% in order to qualify. However, the rate you are able to fix at will depend on the mortgage size, the amount of equity your have in your home and the length of the fixed term. These factors will also affect the fee you have to pay to set up the mortgage.

For example, a homeowner with 25% equity in their home wanting to borrow £120,000 at a fixed rate of 4.34% over five years would pay a fee of £1,799. In contrast, a borrower with the same level of equity wanting to borrow £100,000 at a fixed rate of 3.89% over three years would pay just £799 in fees. And someone with a £100,000 mortgage on a property worth £150,000 wanting to fix for two years at the lowest available rate of 2.49%, would pay £1,899 in set-up costs.

HSBC said the typical arrangement fees will range from £800 and £1,800, although the lowest fee is £499 but you could be charged as much as £4,699.

There is a calculator on HSBC's website (hsbc.co.uk) which enables you to see what rate you can get and the fee you'll be charged based on your own circumstances. However, mortgage experts warn that while the Rate Matcher deal may sound appealing it won't necessarily prove to be the best choice for those wanting to fix.

Louise Cuming at moneysupermarket.com said: "For some borrowers this deal will represent a significantly lower rate than the SVR their current lender is offering. However, the scale of the fees shouldn't be ignored, as this may offset any benefits borrowers see from a lower rate. It is therefore essential that you do your sums and assess the implication of the fee. You may find there are other fixed rate products available which offer better value."

Royal Bank of Scotland, for example has a two-year fix at 3.19% with a £799 fee. First Direct has a three-year fix at 3.89% with a £999 fee and NatWest has a five-year fix at 4.59% with a £299 fee. All of these deals require borrowers to have at least 25 per cent equity in their home.

Don't jump in - research first

Therefore, while the HSBC Rate Matcher offer is worth considering, you should also look into other options to make sure you are getting the best deal. HSBC's mortgages aren't available via brokers. However, if you feel you need help in indentifying the most suitable product for you, it is worth using HSBC's Rate Matcher calculator to see what deal your would qualify for and then speak to an independent adviser who will be able to help you compare that against the rest of the market.